When Divorced Empty Nesters Remarry

Estate Planning Advice
for Every Stage of Life.

When Divorced Empty Nesters Remarry

Later-life remarriages differ from earlier-life remarriages — especially when adult children factor into the equation. If you or your parents plan to tie the knot again, here are some roadblocks that might stand in the way of your family’s happily-ever-after.

Emotional Issues

Marriage is a life-altering commitment. You’re not just merging lives with your spouse — but also his or her entire family. Older folks tend to bring more “baggage” to relationships than younger people. Examples of potential stumbling blocks include ex-spouses, complicated estate plans, legal obligations, long-standing traditions that have to change, friends that don’t embrace a new relationship and, of course, grown children.

To illustrate the potential complexities, consider this hypothetical remarriage scenario, retold from three different perspectives:

“How dare that gold digger steal our dad — and his nest egg!” When Dad (Mike) invites his “lady friend” to meet the family, his adult daughters are naturally skeptical. Then, the couple announces they are getting married. The daughters worry that Dad’s new fiancée is a “gold digger” who will deplete his savings and leave the daughters to pay for his long-term care.

They are also concerned about his recent adventures, which include hiking, flying to Paris and relocating to Palm Springs. They wonder if Dad could be experiencing the early stages of dementia or being taken advantage of by his fiancée

“Who do those spoiled brats think they’re kidding?” The fiancée (Brenda) is a former physical rehab nurse who helped Mike recover from two strokes. Mike’s daughters live more than 2,000 miles away.

Brenda expected to receive the cold shoulder but for awhile, her fiancée’s adult children seem to warm up to her. So she is shocked when they suggest over Thanksgiving dinner that Mike sign a prenuptial agreement. All his daughters seem to care about is Mike’s money, not his happiness. After all, Brenda promised to love Mike in sickness and in health, taking the burden of Mike’s long-term care off the daughters’ shoulders.

“It’s my life — and my money!” Mike is ashamed of how his adult daughters reacted to the news of his engagement. They treated his fiancée like a money-grubbing outsider, even though she’s been living with — and taking care of — him for three years. Mike believes Brenda deserves a portion of his assets when he dies. She breathed new life into his tired routine, introducing him to new hobbies and interests.

At last, Mike found his soul mate, but his kids are questioning his judgment and spending habits. Mike worked hard all his life. He feels that if he wants to spend his retirement, or share it with Brenda, rather than leave it to the girls, it is his right.

These three reactions may be stereotypical, but they represent the full range of emotions people experience when they — or their parents — remarry later in life. Adult children may experience happiness, jealousy, abandonment, fear, disapproval, entitlement or relief. If a parent remarries after the death of a spouse, adult children also may experience feelings of disloyalty and guilt.

Working through these issues requires openness and an ongoing line of communication between family members. Too often, adult children fade into the background and spend less time when their parents remarry. When the parties acknowledge and discuss their fears rationally — and attempt to understand one another’s points-of-view — post-nuptial life can be easier and more rewarding.

However, the wedding toast or reception line may not be the opportune time to express your concerns. Proactive attention to these concerns before the spouses say, “I do,” can mitigate problems down the road, when the parent dies or if he or she becomes incapacitated.

Financial and Legal Concerns

Remarriages also have financial and legal implications. One of the top issues couples fight about is money. So, engaged couples can take these steps so they’re on the same page from the get-go:

Inventory personal finances. Write down a list of personal assets, liabilities, income and expenses that each spouse will bring to the marriage. Include an estimate of each asset’s fair market value. Unless you have a prenuptial agreement, many of these items will become joint property (or obligations) over time.

Also consider how a change in marital status affects existing or prospective financial arrangements. For example, a former spouse may no longer provide alimony or health insurance coverage once you remarry or cohabitate. Or your new spouse’s college-age children might be disqualified from receiving financial aid, because the financial aid forms require disclosure of the parents’ combined net worth after marriage. Remarriage also affects whether you are eligible to receive Social Security from a previous marriage.

Establish your priorities and guidelines. Look at the inventory listing and decide who gets what now (and later). Some later-life couples refrain from co-mingling balance sheets to pass their separate property to their biological children after death. They might also maintain separate bank and investment accounts and take turns paying monthly bills.

To minimize post-nuptial surprises, consider establishing short and long-term budgets that include anticipated timelines for major purchases, such as new vehicles, vacations and loans to family members. Consult with your attorney if you are interested in drafting a pre- or post-nuptial agreement to protect certain assets from a spouse’s lavish spending habits — or from opportunistic family members.

Revise (or create) an estate plan. Before a parent remarries, he or she might not feel compelled to create an estate plan, especially if the estate falls below the amounts affected by federal or state estate tax. But estate planning is imperative when blending families. In many states, surviving spouses may be entitled to a sizable share of the marital estate, unless the parties have signed an explicit waiver, even if others are listed beneficiaries in a will or other legal document.

Various types of trusts can be created to provide for the lifetime needs of the surviving spouse. When the survivor dies, the trust’s assets revert to the spouses’ respective adult children. But beware: Certain setups may limit the family’s right to sell property if the surviving spouse remarries — or require a spouse to rent the property and use the proceeds to pay for the surviving step-parent’s nursing home expenses, for example. An attorney can help avoid these pitfalls.

Revise beneficiaries and assign legal directives. Divorcees sometimes forget about beneficiary designations for their retirement accounts, investment accounts and life insurance policies — providing their ex-spouses with windfalls when they die. So check your beneficiary designations and check with your divorce attorney about any related provisions in your divorce decree.

Also, decide who you want to name as durable power of attorney and healthcare proxy, as well as the executor of your will. These can be tough decisions, especially if you’re opting to take rights away from an adult child and give them to your new spouse. But the rights to make healthcare decisions and to be informed about the partner’s health conditions are major reasons older people choose to tie the knot, rather than simply live together. Also discuss your preferences about life support, resuscitation and hospice to minimize strife among family members if you should become incapacitated.

Consider long-term care insurance. Sure, long-term care insurance products can be expensive. But it can allow older married couples to receive the care they need without impoverishing the healthier spouse.

Before walking down the aisle, many soon-to-be-blended families visit their financial and legal advisers to ensure all the bases are covered. Objective outsiders also keep everyone focused on financial and legal matters, rather than emotional ones.

Increasingly, adult children participate in these discussions to protect their parent’s financial interests and to help splintered families bridge their differences. Blended families can be a blessing in disguise — if the parties work together to resolve their emotional, financial and legal concerns.

If All Else Fails … Some Adult Children Go Further

Without an explicit waiver, a remarried person’s health care, financial and legal decisions typically default to their spouse, if he or she becomes incapacitated. Adult children may feel out-of-the-loop or disagree with the decisions their parents make. In some cases, the adult children turn to guardianships. If successful, adult children can regain control over a parent’s healthcare, financial and legal matters with a guardianship. But process can be costly and time-consuming — and spouses often prevail over adult children, especially if power of attorney has been assigned to the step-parent.

The requirements for applying for guardianship vary from state to state. But generally, a family member petitions the court for authority over some or all of the personal or financial affairs of an incapacitated person. This can be humiliating because the family must prove that the individual cannot handle his or her own affairs anymore. If an adult child is trying to take control away from a spouse, he or she also needs to prove that the step-parent is abusing the incapacitated person physically, mentally and/or financially — or abusing his or her power of attorney authority. Or the adult child might allege that the step-parent has also become incapacitated.

Proving these allegations requires evidence gleaned from intimate details of the couple’s personal life. The process generally involves an evaluation from one or more physicians or other medical professionals, as well as sworn statements from witnesses and other written documentation. Also, a hearing is necessary. The parent and step-parent must receive notice and have the right to appear and challenge the petition. A parent may be angry that adult children are usurping a step-parent’s authority or may be resentful about the loss of independence.

If an adult child successfully proves these allegations, the court will appoint the individual as guardian. A guardian can either handle an individual’s healthcare or finances (or both). Consult with an attorney for more information on guardianships.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

Estate Planning After a Divorce

Estate Planning Advice
for Every Stage of Life.

Estate Planning After a Divorce

During a divorce proceeding, a couple or the court decides how to divide their assets and pay off their debts. The parties or the court also determines custody and child support issues if there are children. When the divorce is finalized, an individual acting prudently should review his or her estate plan to update documents to reflect a new life situation.

Estate planning documents that generally need review after a divorce are:

      • Last will and testament;
      • Living trusts;
      • Power of attorney;
      • Health care proxy (sometimes called a health care power of attorney);
      • Life insurance policies; and
      • Retirement accounts

When you review your will, you need to revise it to change beneficiaries (such as your ex-spouse, if you so desire) as well as review specific bequests of property that you may no longer own due to your divorce. You will have to review who is the designated executor of your will and determine whether to change the designation (the executor could be your ex-spouse and you may not want that).

You need to review any designated trustee for testamentary trust that you previously stated in your will. Also, you may want to change how you distribute assets to your children, if any.

For example, you may believe that your ex-spouse would not properly manage monies you would leave to your children. In that case, as part of your will, you may want to set up a trust which the money will go into, and designate a trustee to manage that money. Perhaps the trustee could be a sibling of yours.

More Points to Consider

Who have you designated as guardian for your children? Generally, if someone who had minor children dies, the other spouse would be the first in line to be the legal guardian, if not already awarded custody of the children. In any event, it would be good to name a guardian for the children in the scenario where your ex-spouse is incapable, unwilling or unable to care for the children. The court would not automatically designate a guardian based on the wishes stated in your will, but will look to your designation as an indication of your intent.

The same is true when you review your “living” trusts. These are trusts wherein you currently have control. Possibly, you had a trust with your ex-spouse. If revocable, in the divorce proceeding, you and your ex-spouse would have revoked a joint trust. If you have a trust in your name or have to create a new one, you may have to change the trustee’s name and revise the assets in the trust due to your divorce.

If you previously had a power of attorney (which designates who handles your finances in the event you become incapacitated or need help in the future), you most likely will have to change the designated attorney in fact. You would also have to change the name of your spouse if you named her or him as your designation to make health care decisions for you in a health care proxy.

Further, you need to review your insurance policies, pension plans, and retirement accounts to make sure that the designated beneficiaries meet the requirements of the divorce settlement or judgment, and meet your current desires.

Consult with your your attorney if you have questions about these issues and you are contemplating, in the middle of, or have completed a divorce.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

How Will You Handle Your Digital Estate? (And, yes, you do have one.)

Estate Planning Advice
for Every Stage of Life.

How Will You Handle Your Digital Estate? (And, yes, you do have one.)

Some assets don’t necessarily fit into our traditional approach to estate planning. We know how to account for bank accounts and real property. But hundreds of dollars’ worth of frequent flyer miles or credit card points? Not so much.

Whether they’re pictures on your social media profile, a PayPal account, a website domain that hosts a small online business, or a growing podcast you put out weekly, there’s an important question you should consider: “Can I pass this on to someone after I die?” And, the next question: “How can I do this?”

What exactly is a digital asset?

Whether their value is financial or merely sentimental, digital assets encompass a large territory. Essentially, your digital property is anything you accumulated during your lifetime that can be accessed through any electronic device.

Following is a brief list to help you figure out what you may possess as a digital asset:

      • Social media accounts: Facebook, Twitter, LinkedIn
      • Digital music: iTunes, Spotify, Pandora
      • Digital eBooks: Kindle
      • Digital magazine and newspaper subscriptions
      • Credits for online purchasing accounts: Amazon, eBay, PayPal
      • Information stored to the cloud: Carbonite, iCloud, Microsoft OneDrive
      • Cryptocurrencies: Bitcoin, Ether, Litecoin, Ripple
      • Reward programs: frequent flyer miles, credit card points, hotel and travel points
      • Online gaming credits
      • Text messages
      • Email
      • Blogs
      • Contact lists
      • Calendars
      • Digital photos, online photo storage accounts
      • Websites and domain names
      • Blogs
      • Podcasts
      • Digital intellectual property
      • Any data or document stored on computer hard drive, tablet or smart phone

Are there any rules regarding a digital inheritance?

Many states have already begun to address the legal issues surrounding access to someone’s digital assets after they pass, but it’s still in its infancy. With no legal precedent, it’s a complicated territory. As technology evolves at a faster pace, new modes of communication are continually being introduced and with them, their own set of complexities. Privacy laws are always at the top of these concerns.

Currently, almost all 50 states have adopted The Revised Uniform Fiduciary Access to Digital Assets Act (2015), or some revision of it. This act essentially gives an appointed fiduciary the right to manage a decedent’s digital assets under certain conditions. However, legislators still have a long way to go. People are amassing larger digital estates, and with them, the desire to protect these assets and pass them on to loved ones.

Can I pass on all my digital assets?

If you purchased a large CD or book collection and would like to pass it on to someone in your will, legally you can do this. However, if you own a large library of digital music or books you purchased and downloaded over the years from iTunes or Amazon, you have no legal right to pass it on to anyone – whether living or dead.

It’s all in the Terms of Service agreement (the one you probably clicked the agree button to but never read). Many assume that once these digital assets are paid for, they’re owned. Most likely, this isn’t the case. The license to use their product is strictly between you and the company. You cannot transfer it to anyone else at any time, even upon death. Once that happens, the contract expires. Think of it as leasing the content rather than buying it.

 

When you purchase music from Apple iTunes, you’re purchasing a non-transferable license to play that music rather than actual ownership of the music. Unlike a physical copy, this digital license is separate from the actual downloaded digital music file.

This is also true for Kindle eBooks from Amazon: the digital content for the kindle is “licensed, not sold, to you by the Content Provider,” so it is nontransferable. You can’t resell it, you can’t donate it, and you can’t leave it to an heir. It’s in the Terms of Service agreement.

Companies are serious about protecting their digital assets. If they discover a direct breach in this contract, they may subject the account to termination, prosecution and damages. This may not be something you want to pass on to others.

Do I have to appoint someone to manage my account?

An idle account is a vulnerable account. Anything you possess digitally could easily fall prey to hackers who will assume your identity, sell your information, and engage in other unconscionable activities – which could be disturbing to your family members and friends. Whether or not this is something you’re concerned about is a personal decision.

What about my email and social media accounts?

Some providers account for death and have set up provisions for account holders to pass on these digital assets to a designated beneficiary. It’s always good to check if this feature is available with each of your online accounts.

 

For instance, Google allows you to designate someone to be contacted before any accounts are deactivated if there’s a prolonged period of inactivity, Google will first contact you via text and email. If there is no response, it will then contact your beneficiaries.

Other major social media and online services that have set up provisions for a decedent’s account include Facebook, Twitter, LinkedIn, Yahoo!, Pinterest, Instagram, and Microsoft. Be sure to check what these guidelines are so you can set your account up accordingly.

However, when it comes to your physical devices such as computers, laptops, tablets, and smartphones, you may not be as lucky. Many brands are unwilling to grant access to anyone but the owner, so you’re better off leaving passwords to a loved one or backing up your data and documents to another known account.

Speaking of passwords . . .

If you have designated a digital trustee to oversee your online accounts after you pass, it’s imperative you keep your list of usernames and passwords up to date and their current location. This can be difficult considering most people can hardly remember all their changing passwords.

To make it an easier process, there are service providers who will give you access to a digital safety deposit box to store your usernames and passwords for a fee. Upon your death, they will release these details to your designated beneficiary who can then access your digital information and property. But, again, this information must be kept current.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

Should I Store My Estate Planning Documents in a Safe Deposit Box?

Estate Planning Advice
for Every Stage of Life.

Should I Store My Estate Planning Documents in a Safe Deposit Box?

I would feel better about placing my original estate planning documents in a safe deposit box. Will this be a problem?

If you’re the sole, living name on this box, it’s not a good idea. Although many states have put policies in place so that a safe deposit box can be opened to obtain estate planning documents like a will or burial instructions, it’s not a quick and easy process. Especially considering no one can obtain immediate access to your assets if you die or become disabled.

Unfortunately, these state policies also set up certain conditions where banks can refuse an individual’s request. For instance, under the Illinois Safety Deposit Box Opening Act, a bank can deny access if the box has been previously opened under 755 ILCS 15/1; if the bank receives or believes it may receive an objection; or if the key or combination isn’t available. These obstructions will prolong the time and effort needed to obtain the documents since they will have to be accessed by other means . . . usually through a court proceeding.

Of course, access isn’t a problem if your spouse is a joint owner. A problem would only occur if one spouse became incapacitated or died and a new co-owner was never named. However, always consider that a new joint owner will also have full access to the contents of the box.

Why can’t my agent for Durable Power of Attorney for Finance access my box if I give them authority to do so?

Due to liability issues, financial institutions are taking stricter precautions about who can access another person’s assets with the bank, even with a power of attorney. Because policies differ from bank to bank and state to state regarding safe deposit boxes, it’s important to ask your bank about its specific procedures so there will be no surprises.

How about titling the safe deposit box in the name of my trust?

This seems like a reasonable solution to ensure a successor trustee will have access to your safe deposit box. Unfortunately, in our current litigious culture, most banks are wary about allowing safe boxes to be titled this way. For them, it could be a liability if clients assume anything placed in the box is also placed in the trust. Banks want no involvement in potential arguments among heirs about the contents of a box.

It’s possible some banks may make an exception if you lean into them or get an attorney involved. However, it appears most would rather not, so be aware that permission may be difficult to obtain.

Are the originals really needed? Can’t I just make copies available?

The original always beats a copy. While it’s possible to use copies of estate planning documents in some circumstances, it’s wise to always have your original available to those who need it. A copy will never have the same legal effect or force since you could run into some situations where its validity is questioned.

What’s the best solution for storing my estate planning documents?

It’s wise to only store those items in a safe deposit box that are not needed upon your incapacitation or death. Because banks and states differ in policies, there is no streamlined way to quickly access someone else’s box to obtain important documents. A better alternative would be to store them in a secure home safe – fireproof, waterproof and bolted to the floor or wall studs.

Of course, it’s important that responsible parties also know the combination to this safe. If not, you’ll just be exchanging one set of problems for another . . . or they’ll just need to find a good locksmith.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

How to Make Sure Your Estate Plan Doesn’t Fail

Estate Planning Advice
for Every Stage of Life.

How to Make Sure Your Estate Plan Doesn’t Fail

You may be familiar with the saying, “Failing to plan is planning to fail.” It’s a significant reason why people set up an estate plan – to be prepared for the unexpected. And, of course, the inevitable.

But estate planning doesn’t end when legal documents are drawn up, executed and placed in a book for another day.  Organization and communication are also crucial steps in this process. Without them, a relatively straight-forward process gets sideswiped by confusion, frustration and uncertainty. Ultimately, this costs time and money.

The Rainy Day

It’s common human behavior to think you’ll get around to it when things slow down – our “save-it-for-a-rainy-day” mentality. But what could inevitably happen to that good intention to do it later?

Absolutely nothing if the unexpected happens first.

It could be a tragic accident, a stroke, an emergency surgery, or a life-threatening illness that shuts you down. It’s possible you could end up in critical condition, completely impaired, or hooked up to life-sustaining machinery.

What becomes of that living will or advance health care directive you created for a time such as this? If no one knows this document exists or can’t find it, absolutely nothing.

It’s as if you never had a plan in the first place. Those lost documents hold no power to help you direct the decision-making process when you finally need them to.

This holds true for any of your estate planning documents.

If you become incapacitated or incompetent and your named agent doesn’t have your financial power of attorney or living trust, accounts can’t be accessed and bills can’t be paid. Without a concrete will or living trust in hand, it’s not possible to execute your estate according to your wishes. In fact, if your home has been placed in a trust and no trust can be found, your beneficiaries will have to go through hoops if they choose to sell it.

The Hunt

We’ve received plenty of calls from clients and their family members who had no idea where the original documents were placed. Often, it was at a time when specific documents were urgently needed.

They spent hours digging through rooms, boxes and papers. They tried to pry open a safe or gain access to a bank deposit box. They even located others who might possibly have them in possession. And, of course, they gave our office a call in hopes of obtaining a copy. Yes, we do keep digital copies of the originals in our files. But the original always beats a copy.

The Proactive Plan

However, advanced planning by organizing your documents and communicating what is in them will ensure situations will be handled how you want them to be handled when that time comes.

Organize a secure, permanent location for your originals. Communicate to those responsible where they are and how to access them. Give copies to your agents, your medical practitioners, and financial institutions so they have them when they need them. And even communicate your expectations to your loved ones so they can better handle that burden should the time arrive.

Organization and communication most likely won’t end with your own personal estate plan. It’s a vital part of any estate plan you are party to – whether parents, children, family members, and friends. What holds true for you holds true for them when it comes to making financial and health decisions.

If you’re an agent for power of attorney, get a copy of the document. If you’re an executor or trustee, make sure you know where the document is and how to easily access it. In fact, take it a step further and know what you’re expected to do as an agent, executor or trustee so you’re better equipped when that time arrives.

We know that part of your intention for an estate plan is to ease the burden on your loved ones. But if documents can’t be found after your death, the court will have no choice but to proceed as though you died intestate. That is, you died without an estate plan. Your estate will go through probate where the court will decide who gets your assets rather than you making that final decision.

But you can prevent this from happening. It starts today.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

Avoid These 8 Common Mistakes in Your Revocable Living Trust

Estate Planning Advice
for Every Stage of Life.

Avoid These 8 Common Mistakes in Your Revocable Living Trust

A revocable living trust has long been an important part of estate planning. Done correctly, a living trust can help protect your heirs from creditors and probate and supply them with any funding you’d like them to have.

However, a revocable living trust might not meet your goals if it isn’t arranged properly and periodically reviewed for any changes to your circumstances that would make a revision necessary. As you make a living trust part of your estate plan, you want to ensure that you avoid the following eight most common mistakes:

1. Leaving out assets. 

Assets that are titled in your name will go through probate after you die. Aside from certain annuities and qualified retirement funds, make sure that you’ve included all of your assets in your trust while you’re still alive. Possibly, you can designate your trust as a beneficiary of your accounts.

2. Drafting the living trust on your own. 

There are an abundance of DIY software packages and Internet sites that offer living trust forms. These might be cheaper than hiring an attorney to help you, but cheaper isn’t always the best option. This is especially true for those with estates that aren’t plain and simple.

3. Picking the wrong person to act as successor trustee. 

Make sure that the trustee you pick is the best and most capable person to manage your assets, not the person you feel obligated to pick. You might consider multiple co-trustees to manage your assets after your death or during any period of disability, or you could even name a trust company or bank as a co-trustee or trustee. In any case, pick the trustee(s) that you feel would best act in your stead.

4. Assuming trust assets aren’t subject to estate taxation. 

Keep in mind that all assets in a revocable trust will be considered when calculating your gross estate for estate tax purposes once you’ve passed away.

5. Thinking that a trust protects you from creditors. 

Even though your assets are in a trust, the majority of living trusts are composed in a manner that still gives you full access to the assets. As such, those assets will still be legally available to your creditors as well. That said, a correctly drawn trust can offer your children and spouse protection from their own creditors.

6. Assuming trust assets will not be counted for Medicaid eligibility determination. 

Assets in a trust are counted during the Medicaid eligibility determination process.

7. Forgetting to name your charities as beneficiaries. 

If you would like to continue any regular donations to a charity, school, or church after you pass away, then you might want to include them as you arrange your living trust.

8. Not periodically reviewing your trust. 

Life goes on after your trust is drafted. Of course, this means possible births, marriages, divorces, deaths, disasters, changes to your retirement plan or employment, and so forth. These types of changes often make it necessary to update your living trust.

Consult with your attorney to discuss whether a living trust would be beneficial in your situation.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

Charitable Remainder Trust: Save on Taxes While Doing Good

Estate Planning Advice
for Every Stage of Life.

Charitable Remainder Trust: Save on Taxes While Doing Good

If you own assets that have appreciated significantly over the years, you may be able to profit more by giving them away than by selling them.

By setting up a charitable remainder trust (CRT), you can transform a future tax liability into a current tax break, receive a steady source of income for the rest of your life and leave a gift to your favorite charity.

Here’s how it works. Let’s say you invested $50,000 years ago in a stock now worth $350,000. One option is to sell the stock now and use the proceeds to help finance your retirement. But you’ll owe capital gains taxes on your profit and you may owe state taxes too.

Instead, you set up a CRT to benefit one or more charities and transfer the stock to the trust. Because the trust is tax-exempt, it can sell the shares and reinvest the entire $350,000 in a portfolio that you administer.

You receive income generated by the trust assets for the rest of your life. The assets are no longer in your taxable estate because when you die, the charity or charities get the remainder of the trust. In exchange for your future gift, you escape capital gains tax and get an immediate tax deduction for a portion of the value of the assets transferred to the trust.

Despite the advantages, CRTs aren’t for everyone. For one thing, if you give away assets, your heirs won’t receive them. Some people handle that by buying life insurance or setting up a Wealth Replacement Trust so their children still receive an inheritance (see the right-hand box).

Here are seven basic steps involved in a CRT:

Step 1. When you establish the trust, you become the trustee. You can name a successor to act as trustee if you later become incapacitated.

Step 2. You designate a charity or non-profit organization to receive the remainder of the CRT after you die.

Step 3. You donate appreciated assets, such as stock, real estate or a business, to the CRT. There is no limit on the amount. The CRT generally sells the assets and buys income-producing investments, such as dividend-paying stocks.

Step 4. You get a tax deduction for the charitable gift. The exact write-off depends on your age and the income payments you receive. Part of your deduction may be delayed, but unused deductions can be carried forward for five years.

Step 5. As trustee, you invest the proceeds from the CRT’s sale of the assets. Any gains are tax-free because the CRT is tax exempt.

Step 6. The trust pays you income for life or for the trust term. The payments depend on the type of CRT you set up. There are two basic types:

          • An annuity trust, which pays out a fixed amount each year.
          • A unitrust, which pays out a fixed percentage each year based on the value of the assets in the trust. If the trust assets increase in value, so does your income.

Step 7. When the last beneficiary dies, or at the end of the trust term, the assets are distributed to the charity or charities that you have designated.

A charitable remainder trust may be a good vehicle for you to reduce taxes and benefit a worthy cause while preserving your financial stability. Consult with your estate planning advisor to see if it’s right for you.

What About the Kids?

With a charitable remainder trust, you may be worried about giving away a large share of the inheritance given to your children.

You may want to consider buying life insurance or setting up a “Wealth Replacement Trust” to make up the difference for your children.

This trust owns, pays premiums on, and is the beneficiary of a second-to-die life insurance policy. The idea is the policy replaces the lost inheritance.

You give money to the trust every year to finance the policy. The premium, once established, remains stable for life. Upon the death of the second spouse, your children receive the life insurance proceeds from the trust. The proceeds are tax-free.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

7 Reasons to Update a Will

Estate Planning Advice
for Every Stage of Life.

7 Reasons to Update a Will

Once you or your loved ones have a will drawn up, don’t just put it away for safekeeping and forget about it. If your will doesn’t keep pace with changes in a person’s life, it could cause chaos later. Following are seven major life events that could make you rethink the contents of your current will.

1. Deaths.  If individuals named (as heirs or executors) have died or they become incapacitated, a will should be changed.

2. Assets. Revisions may be needed if the value of assets has increased or decreased significantly, or they are no longer owned. For example, if you specifically leave your home to one of your children, and later sell it, you may want to change the distribution of your other assets.

3. Marriage.  Wedding bells usually signal the need to review a will. Which assets should pass to your spouse? Are step-children involved? If this is not spelled out in a will, the state will decide. In a community property state, a spouse automatically inherits half of all community property. In most other states, a spouse may receive one‑third to one‑half of the estate, absent any other directions.

Also, keep in mind that an unmarried couple living together may want to leave assets to each other but in order to make an inheritance happen, it must generally be spelled out in a will.

4. Divorce. In many states, a divorce automatically revokes a will or those provisions concerning an ex‑spouse. As a result, if you get divorced, it’s best to have a new will drafted. For instance, you might have your former spouse removed as a primary beneficiary. In addition, you may want to change the beneficiary of your life insurance, pension or any existing IRAs. Consider the use of a trust if children from a previous marriage are involved.

You may also want to change your will if one of your children gets divorced.

5. Births.  Once parents have children, their wills should be amended immediately to include the names of guardians to care for the children in the event the parents die prematurely. Also, parents or grandparents might wish to restructure their wills concerning distribution of assets after children are born. Again, the use of a trust may be recommended.

6. Retirement.  This event may also trigger the need to make changes to an existing will. For example, many retirees sell their homes and move to other states. But state laws can vary widely. Furthermore, individuals may consider a power of attorney that enables someone else to act on their behalf in the event of certain illnesses.

7. Tax law revisions. The Internal Revenue Code is regularly changed. In fact, many aspects of estate tax planning are in flux right now. A will should be designed to take advantage of maximum tax benefits that exist today so it may have to be updated as tax laws change.

You don’t have to tackle this problem on your own. If you need to update a will, contact us so we can help you.

WHERE IS IT?

Before it’s too late, people should let someone know where their original will is stored. If one can’t be found after a person dies, a court may decide it was destroyed. It’s a good idea to keep a copy in a safe deposit box, but don’t put the original there without checking state law. Some states require that safe deposit boxes be sealed after the renter dies.

Other options include:

      • Store an original will in the office of the county Clerk of the Superior Court. (It must be retrieved if the person moves.)
      • Have your attorney and/or your accountant retain the original will. Ask them what will happen to the document if they die, move, or quit practicing.
      • Store the will at home. Of course, it could be lost, inadvertently destroyed or discovered by an interested party who could deliberately destroy, conceal, or alter it.
PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

What Immediate Actions Must Be Taken Right After Someone Dies?

Estate Planning Advice
for Every Stage of Life.

What Immediate Actions Must Be Taken Right After Someone Dies?

When a loved one dies, family members are not only in mourning — they may be in a state of uncertainty about what to do next. While everyone is respectful to the loss of the loved one, tension can arise over who must take responsibility for arrangements and costs. Confusion often arises.

In the weeks and months after the death, a person will be appointed by the court and assets will be inventoried and distributed. But what are the steps that must be taken in the first days after the death? This article answers some of the questions you and your family may have in this situation.

Who Pays the Funeral Director?

In some cases, the funeral director wants payment the day of the burial or even prior to the funeral. Yet, the money from the estate and the deceased person’s accounts is not yet available. Who pays? The person who usually covers funeral costs is the family member who is the named executor in the will. Later, the executor will be reimbursed from the assets of the estate when the will is probated.

If the executor does not have the funds to pay the director, then most likely other family members will pitch in to pay the funeral director and be reimbursed by the estate.

What if the estate has no assets to reimburse the executor or family members? Then, all family members should pitch in for the expenses.

If the executor is a non-family member, then the family usually pays for the funeral and is reimbursed from the estate.

If there is no will, the family members will have to choose someone who would be the administrator of the estate and the proposed administrator would pay or family members would pitch in to pay the funeral director. Reimbursement will be from the estate.

If your loved one has bank accounts that are “payable on death” (and don’t go through probate), the beneficiaries might be able to access the accounts in time to pay for the funeral. However, the bank will need to see a death certificate and it may take too long to get one issued (see below for more information about bank accounts).

Note: The decedent may have taken steps to pre-pay for a funeral plan or a burial plot. Check the individual’s personal papers to check for this.

What are Typical Funeral Expenses?

Generally, all expenses that reasonably relate to the burial of a loved one can be considered an expense of the estate. The expense must be relevant to the ceremony or burial or service.

This includes:

      • Casket;
      • Funeral director’s basic service fee;
      • Embalming and body preparation;
      • Cremation;
      • Funeral ceremony and viewing;
      • Hearse;
      • Gravesite;
      • Cost to dig the grave;
      • Headstone and grave marker;
      • Family reception, catered food;
      • Clergy fees; and
      • Florist fees.

Again, all costs must be reasonable. Otherwise, the court may reject the costs (or reimbursements) as an expense of the estate.

When Are Papers Filed in Court?

In some states, there is a waiting period before papers can be filed in court. This is done out of respect for family members to allow them time to grieve. However, if there is an immediate need to file papers to handle a financial matter, the court may entertain an expedited motion or grant temporary letters to resolve the need (for example, to pay health care costs for a surviving spouse; to pay rent; or to run a company). In any event, it would most likely still take a few days before the court would issue an order.

What Happens to Bank Accounts, Credit Cards and Other Assets?

Generally, the proposed executor or estate administrator notifies financial institutions and credit card companies of the death of the decedent — even before the estate administration. This should put a hold on the account. Sometimes, these institutions require a death certificate, which can take a few days to obtain. But it puts banks and credit card agencies on notice in case someone tries to take money from the account or use a credit card.

Once the person has died, no one should write a check from the bank account or attempt to use the decedent’s credit card. Basically, everything is frozen at the date of death until there is a personal representative appointed by the court and an estate account is opened. Further, all other personal assets should remain as is. There is some leeway as to necessities such as moving a car for street cleaning, etc. But generally, nothing should be touched unless necessary to move. All assets should be inventoried as soon as possible.

Important: If a bank account is held jointly by spouses or by two people jointly with rights of survivorship, the account holder who survives can likely write checks. Ask your estate attorney or your bank for more information.

Reasonableness and Respect Are Key

This article only covers some of the immediate issues faced by family members and friends when a loved one dies. Because of the emotional state that most people experience upon the death of a loved one, family members should proceed cautiously when handling the immediate financial needs of the decedent’s estate prior to the opening of an estate by a court. Family members who pay for funeral expenses should keep track of their expenses. They should refrain from attempts to transfer the decedent’s money until authorized by the court. Speak with your attorney about these issues.

More Steps to Take

Does the deceased own pets? Make sure someone takes care of them.

Is the home secured? Ensure the doors and windows of the individual’s home are locked. Cancel newspapers and pick up mail. File a change of address form with the Post Office so the executor receives mail. A home that looks vacant with newspapers and mail piled up can be a magnet for thieves.

What about Social Security? The Social Security Administration should be notified as soon as possible after a person dies. In most cases, the funeral director will report the person’s death to Social Security.

Getting in touch with Social Security ensures that family members will get any benefits to which they might be entitled. In addition, notification allows the government to stop deceased individuals from receiving benefits. (If benefits are erroneously received by survivors, they must be returned.)

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

How to Prove You’re an Heir of a Distant Relative

Estate Planning Advice
for Every Stage of Life.

How to Prove You’re an Heir of a Distant Relative

Many people fantasize they will get a notice stating they are entitled to inherit money from a long-lost relative. This could be someone that the individual may not have seen in years or may not have even met.

The concept of “found money” is a popular one, as evidenced by the email scammers sending messages claiming that recipients are entitled to a fortune left to you by someone in Nigeria or some other unlikely location. There are also email frauds that inform numerous recipients that they are the heirs of a fortune or just won the lottery. For some people, there is some element of hope in these messages even though they are obvious scams. These scams generally ask for personal information, such as your bank account, Social Security or credit card numbers. The information is then used to steal your identity and your money.

However, what happens if you actually get a legitimate notice that you are entitled to inherit money or you become aware of a proceeding where you may have a legitimate interest in an estate? There are certain procedures that you would have to follow in order to actually receive the money. You must prove that you are an heir.

This usually happens with a older aunt or uncle (or great aunt or uncle) who did not have children and either never got married or their spouses previously died. The situation may also occur with long-lost cousins that you may not have even known existed.

When a person like this dies with assets for distribution, an estate proceeding commences. Courts will require that the executor or personal representative notify or cite known heirs. If heirs are unknown, the executor must publish a notification in a newspaper and appoint a guardian in the proceeding to protect the interest of the unknown heirs.

Let’s say you’re one of those people coming forward claiming you are an heir.

Even if you are a known heir, there may be heirs that would inherit before you that cannot be found. Part of the process of proving you are entitled to money is to show there are no heirs in front of the line to inherit or they died prior to the death of the decedent.

It can get complicated and usually there is a proceeding to prove your kinship to the decedent.

What Proof Is Needed?

As stated, before you can receive an inheritance, you must show that there is no one who is in line ahead of you. For example, you would have to show that your aunt was not married, that her spouse died, that she had no children or they died before her, that her parents and siblings are dead or that she had no siblings. You could do this if you have the death certificates of the relatives or if you had an affidavit of someone who knew her (and her family) other than a blood relative.

If you do not know any of these facts, you would have to do a search of the heredity records or database.

The court will require significant effort on your part. With today’s technology and websites devoted to finding ancestors and municipal websites where you can search applications for death records or certificates, it can take weeks or months for you to collect the data necessary to show the court you did your due diligence. You need to prove you tried to find all the heirs and prove they are not alive or entitled to receive money, but you are.

Then, when in court, you would have to present the evidence in a systematic way and provide testimony, including possibly from unrelated witnesses to help prove your case. Afterward, the court may require additional information or may not be fully convinced. There could be an element of negotiation or settlement if it appears you did your best effort on proving your inheritance but there is little chance that someone else may step forward ahead of you.

Speak to your attorney about these issues if you believe you are entitled to money as a long-lost heir or you want to make changes to your estate to help ensure you know where your assets will go after your death.

Why It’s Critical to Have an Estate Plan and a Will if You Have No Close Relatives

If you die without a will (legally known as intestate), there will generally be a court proceeding to determine who will be your executor or personal representative. Then, your state will follow its (often complex) laws to determine who gets your assets. If you are not married and have no living children or siblings, your assets may wind up in the hands of distant relatives. If no relatives can be found, then your assets will go to the state.

This may not be what you want. Perhaps you would rather the money go to close friends, an unmarried partner or a favorite charity. If so, contact your attorney to draft an estate plan, which will include a will that specifies your wishes.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group.